Should we refinance?

[skives]

We currently owe $90,856.45 on our home. If we continue paying as we are ($1,356) a month it will be paid off October 2026. We pay extra each month. Normal payment is $557.84.

a local credit union is offering a 2.375% 10 year loan refinance. Our current interest rate is 3.625%.

We have no other debt and our taxable income is $80,000 a year.

based on my calculations after closing costs we would save $1,331 in interest on the life of the loan. We would continue to pay the loan off based on the current schedule so the new loan would also be paid off in October 2026.

Would you refinance?

[disneysteve]

If you can drop the rate by 1.3%, why wouldn't you be able to advance the payoff date? More of each payment would go to principal so if you keep paying the same amount each month, it should be repaid sooner?

I see nothing wrong with saving over $1,300. I think that's worth the bit of time to do all of the paperwork.

[ua_guy]

It sounds like you've done the right calculations to see how interest savings compare to closing costs, and you're planning to pay off the loan on the same schedule. From a standpoint of savings, it seems worth it.

Times are a bit uncertain, so the question I'd have is, if your monthly payment is going up, would that become an issue if one or both of you lost your jobs. And/or is your EF adequate to cover the new payment amount (somewhere around $850/month?) for the period of time you intend your EF to last? Just things to think about.

[skives]

It sounds like you've done the right calculations to see how interest savings compare to closing costs, and you're planning to pay off the loan on the same schedule. From a standpoint of savings, it seems worth it.

Times are a bit uncertain, so the question I'd have is, if your monthly payment is going up, would that become an issue if one or both of you lost your jobs. And/or is your EF adequate to cover the new payment amount (somewhere around $850/month?) for the period of time you intend your EF to last? Just things to think about.

Payment would be the same ($1,356). Plus this would probably pay it off a tad early 1 or 2 months.

currently have $32k in ef and adding to it monthly.

[kork13]

If you're planning to stay in the house over those next 6 years, there are literally zero reasons to not do it. Call them today & make it happen.

[disneysteve]

If you're planning to stay in the house over those next 6 years, there are literally zero reasons to not do it.

I think that's the answer. What possible downside is there to refinancing (other than the bit of work involved in doing so)?

[myrdale]

The general rule of thumb is if the new interest rate is at least 1% or more, less than the old interest rate you should refinance.

Also though you should take into account how far you are into the mortgage. If this is $90,000 of $100,000, I believe it is going to be different that if the original amount was $250,000 or $500,000.

If you were all the way down to $20,000 it probably wouldn't make sense to refinance.

I'd consider looking at a 30 year mortgage to lower monthly payment, then pay it off at the 10 year rate.

EDIT: Riverwed070707 got me. 30 yr is higher not lower.

[riverwed070707]

I'd consider looking at a 30 year mortgage though to see if you can get an even lower rate, and lower monthly payment, then pay it off at the 10 year rate.

30 year mortgages have higher rates, not lower. The payment on a 90k mortgage over 10 years is under $900... they're currently paying $1300... I would never recommend someone take a 30 year - honestly think anything less than 20 and you can't truly afford the home.

To OP - I'm shocked you're only seeing a savings of $1,331 over 10 years but savings is savings and I'd probably do it.